$  3  fe.  1  3 
L  1  5  5  |= 


Reprinted  from  The  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  Philadelphia,  November,  1915. 

Publication  No.  944. 


THE  PROPER  FUNCTION  OF  THE  STATE  BUDGET 
By  S.  Gale  Lowrie, 

Professor  of  Political  Science,  University  of  Cincinnati. 


The  history  of  the  development  of  representative  government 
is  the  record  of  a  struggle  for  popular  control  of  the  public  purse. 
There  is  no  principle  upon  which  our  political  institutions  are  more 
firmly  based  than  that  the  public  finances,  both  with  respect  to  the 
raising  of  revenues  and  the  expenditure  of  state  funds,  should  be 
regulated  by  those  upon  whom  levies  are  to  be  made.  The  great 
land-marks  of  our  constitutional  history,  the  Magna  Charta,  the 
Model  Parliament,  the  Declaration  of  Independence,  the  formation 
of  the  Union — all  had  their  inception  in  the  desire  for  a  reform  in 
fiscal  management.  No  nation  has  made  a  more  constant  effort 
than  have  we  to  escape  the  perils  of  bureaucracy  and  to  keep  repre¬ 
sentative  the  offices  charged  with  the  management  of  the  affairs 
of  government,  particularly  those  involving  expenditures.  Never¬ 
theless,  we  stand  almost  alone  among  modern  governments  in  that 
neither  our  federal  government,  nor  any  state,  has  as  yet  installed 
the  most  necessary  device  for  regulating  our  public  expenditures, — 
a  modern  budget  system.  With  the  tremendous  growth  in  the  cost 
of  government,  which  the  past  decade  has  witnessed,  caused  chiefly 
by  the  ever  widening  scope  of  our  governmental  activity,  there  has 
been  no  little  alarm  because  of  the  Increased  demand  for  revenues. 
Most  of  our  states  have  begun  to  take  serious  thought  of  the  need 
for  new  budgetary  methods  and  we  have  ventured  to  hope  that  an 
adequate  fiscal  system  may  be  installed  in  our  federal  government. 
Though  attention  has  been  drawn  to  the  desirability  of  this  reform 
and  several  states  have  proposed  changes,  looking  toward  a  better 
control  over  public  grants,  no  wholly  adequate  method  has  yet 
been  adopted.  In  fact  we  have  hardly  begun  to  think  clearly 
enough  on  the  subject  to  know  what  may  and  what  may  not  be 
accomplished  through  an  adequate  budget  plan,  or  to  know  just 
what  sort  of  a  budget  plan  is  desirable. 

The  budget  is  the  fiscal  plan  of  the  government.  It  embraces 
vD  an  estimate  of  the  receipts  which  are  expected  during  the  period 

l 


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The  Annals  of  the  American  Academy 


under  consideration  and  of  the  expense  of  carrying  out  the  program 
of  work  contemplated.  A  most  essential  feature  of  any  budget  is  a 
budget  balance — a  close  correlation  between  the  state’s  receipts 
and  disbursements.  Should  the  revenues  of  the  government  exceed 
the  authorized  expenditures,  a  surplus  will  accumulate  in  the  public 
treasury  which  not  only  represents  an  economic  loss  in  taking  funds 
needlessly  from  commercial  channels,  but  which,  as  the  experience 
of  our  federal  government  particularly  has  shown,  invites  extrava¬ 
gance  upon  the  part  of  succeeding  legislative  assemblies.  On  the 
other  hand,  should  the  income  of  the  state  prove  inadequate  for 
the  program  adopted,  the  governmental  functions  must  be  inter¬ 
rupted  and  grants  authorized  be  denied,  or  the  services  must  be 
carried  on  through  borrowings  which  must  be  repaid  with  interest 
at  some  future  time.  To  establish  a  proper  balance  between  esti¬ 
mated  receipts  and  disbursements  requires  the  most  intelligent 
planning  by  persons  possessed  of  the  fullest  information  of  the  fiscal 
affairs  of  the  state.  It  is  no  slight  evidence  of  the  skill  with  which 
the  British  budget  is  prepared  that  in  normal  times,  the  discrepancy 
between  actual  receipts  and  disbursements  seldom  exceeds  1|  per 
cent.  Not  only  must  a  balance  be  established  between  income  and 
expenditure  but  a  most  careful  scrutiny  must  be  made  of  the  work 
to  be  undertaken  to  see  that  the  available  funds  are  distributed 
wisely  among  the  various  state  services.  This  can  be  accomplished 
only  where  the  planning  body  has  an  intelligent  understanding  of 
the  many  phases  of  the  state’s  activity  and  a  definite  program  in 
view. 

The  first  essential  of  any  adequate  budget  plan  is  the  prepara¬ 
tion  of  estimates.  This  is  a  highly  technical  duty  and  must  be  per¬ 
formed  by  those  most  familiar  with  the  facts.  For  this  reason  the 
best  qualified  officer  to  estimate  the  receipts  is  the  auditor  or  other 
person  whose  duties  give  him  the  fullest  information  respecting 
state  funds.  The  proper  officers  to  prepare  estimates  of  needed 
appropriations  are  the  department  chiefs.  They  are  the  govern¬ 
ment’s  experts  in  their  respective  fields.  They  have  the  most 
intimate  knowledge  of  the  work  in  their  charge  and  of  the  appro¬ 
priations  needed  for  their  proper  development.  Consequently 
every  modern  budget  plan  is  based  upon  departmental  estimates  of 
funds  required,  together  with  the  estimates  of  anticipated  income 
from  the  official  who  best  knows  what  the  state  will  probably  receive. 


Function  of  State  Budget 


3 


The  accumulation  of  these  data,  however,  is  but  the  commencement 
in  the  preparation  of  the  state  budget.  From  these  recitals  of 
departmental  requests,  a  state-wide  plan  must  be  evolved,  wherein 
one  need  is  weighed  against  another,  and  the  entire  scheme  of 
expenditure  compared  with  the  plan  for  raising  revenues,  so  that  a 
well-rounded  program  may  result. 

There  has  been  some  difference  of  opinion  as  to  what  officer  or 
body  should  receive  the  departmental  estimates  and  prepare  the 
state  budget.  Some  have  considered  it  a  duty. which  should  be 
performed  by  the  chief  fiscal  officer,  the  auditor.  Others  have 
thought  it  to  be  the  function  of  the  chief  executive,  while  still  others 
hold  that  a  committee,  upon  which  these  officers  and  members  of 
the  legislature  are  represented,  should  discharge  this  service.  There 
is  little  doubt,  however,  in  the  minds  of  those  who  have  given  the 
matter  most  serious  consideration,  but  that  the  chief  executive  is 
the  proper  officer  for  this  task.  The  budget  embodies  the  govern¬ 
ment’s  fiscal  policy.  It  is  a  definite  proposal  for  legislative  action. 
It  must  be  prepared  by  one  thoroughly  familiar  with  the  govern¬ 
ment’s  plan  of  activity,  and  familiar  with  the  needs  of  the  state 
in  its  various  branches.  None  other  than  the  chief  administrative 
officer  possesses  the  information  necessary  for  the  construction  of  a 
proper  plan,  nor  is  any  other  official  or  body  commissioned  to  pro¬ 
pose  legislative  policies.  Consequently,  one  can  scarcely  question 
that  it  is  the  duty  of  the  Governor  in  our  states,  and  of  the  President 
in  our  federal  government  to  execute  this  task.  But  while  it  has 
become  an  established  practice  in  our  cities  for  the  Mayor  to  propose 
the  municipal  budget,  the  practice  has  not  as  yet  been  followed  in 
our  state  or  federal  governments.  The  requirement  that  the  Gov¬ 
ernor  prepare  and  transmit  a  budget  is  one  of  the  most  excellent 
features  of  the  proposed  constitution  for  the  state  of  New  York. 
It  is  made  the  function  of  the  Governor  of  Ohio  by  statute,  but  as 
yet  fear  of  usurping  a  legislative  prerogative  has  prevented  the  execu¬ 
tive  of  this  state  from  properly  discharging  this  duty. 

But,  however  wisely  and  carefully  the  budget  may  be  prepared, 
unless  it  is  received  by  the  legislative  assembly  in  a  spirit  of  coopera¬ 
tion,  little  good  can  result.  The  appropriating  body  may  disregard 
the  expert  estimates  submitted  to  t  and  proceed  on  its  own  motion 
to  prepare  a  statement  of  what  it  believes  to  be  the  departmental 
needs.  This  practice  is  followed  in  France  and  is  the  cause  of  much 


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The  Annals  of  the  American  Academy 


of  the  difficulty  experienced  with  the  system  of  appropriations  of 
that  country.  Or  the  state  budget,  instead  of  being  considered  in 
its  entirety  as  a  great  plan  for  the  whole  government,  may  be  sep¬ 
arated  into  parts  and  referred  to  distinct  committees.  This  is  the 
practice  in  our  federal  congress,  where  in  the  lower  house  alone, 
appropriation  bills  are  considered  by  eight  different  committees. 
It  is  also  a  vice  of  the  French  system.  Whether  the  legislative  body 
be  unicameral  or  bicameral,  whether  it  sit  as  a  committee  of  the 
whole  or  act  through  sub-committees,  it  is  essential  for  any  well- 
rounded  plan  that  all  phases  be  considered  together.  No  in¬ 
telligent  plan  embracing  the  entire  state  can  be  formulated  or 
approved  unless  all  the  anticipated  receipts  and  all  the  contem¬ 
plated  expenditures  are  viewed  at  the  same  time  by  the  joint  legis¬ 
lative  assembly,  or  by  a  single  joint  committee. 

The  practice  which  has  been  followed  in  our  federal  govern¬ 
ment,  and  in  our  states,  has  signally  failed  because  the  most  essential 
feature  of  state-wide  planning  has  been  lacking.  It  has  been 
assumed  that  it  is  the  function  of  the  legislative  assembly  to  propose 
the  appropriation  measures.  In  some  way,  it  has  been  thought 
that  this  method  assured  a  control  of  expenditure  more  in  keeping 
with  popular  desire  and  that  a  check  on  the  extravagance  of  admin¬ 
istrative  officials  might  thus  be  maintained.  But  our  experience 
with  the  plan  of  legislative  initiation  has  not  been  a  happy  one. 
The  reason  is  simple — the  preparation  of  the  budget  requires  a 
minute  insight  into  the  affairs  of  the  state  departments,  which  the 
legislature  does  not  have,  and  a  skill  in  planning  for  the  development 
of  these  agencies  which  the  members  can  not  easily  acquire.  By 
its  very  form,  the  legislature  must  be  an  approving,  rather  than  an 
initiating  body.  Initiation  must  be  an  individual  act.  To  require 
legislative  initiation  is  to  demand  that  some  delegated  member  pro¬ 
pose  a  plan  for  approval,  and  no  member  of  the  legislative  assembly, 
with  the  machinery  at  his  disposal  and  with  his  limited  experience, 
an  prepare  a  proper  fiscal  program. 

The  first  step  then  in  the  making  of  a  budget  is  the  formation 
and  submission  of  a  plan  by  the  executive  for  the  support  of  the 
state  service  for  the  fiscal  period.  This  is  effected  by  the  trans¬ 
mission  of  estimates  prepared  by  the  various  departments  and  so 
adjusted  as  to  make  a  harmonious  plan  for  the  whole  state.  The 
second  step  is  the  criticism  and  approval  of  these  plans  by  the 


Function  of  State  Budget 


5 


appropriating  body,  keeping  in  mind  always  the  resources  and  the 
entire  demands  to  be  met  by  the  public  treasury.  The  third  step  is 
the  passage  of  the  appropriation  act,  which  is  the  authorization  of 
the  legislative  body  to  spend.  When  this  has  been  granted,  the 
evolution  of  the  budget  is  nearly  completed.  There  remains  but 
the  function  of  the  auditor  in  determining  that  the  actual  expendi-  ^ 
tures  have  been  used  for  services  authorized  by  the  legislature. 

One  of  the  reasons  we  have  made  so  little  progress  in 
budgetary  matters  in  this  country  is  that  we  have  not  had  a  clear 
idea  of  what  a  budget  system  really  involves  and  just  what  we  may 
reasonably  expect  to  accomplish  through  its  use.  In  fact  the 
question  might  well  be  raised  as  to  whether  we  have  not  done  more 
to  promote  ignorant,  corrupt  and  inefficient  government  through 
the  adoption  of  ill-devised  appropriation  systems  than  to  establish 
economical  and  intelligent  government  by  the  adoption  of  rational 
methods  of  granting  funds.  It  is  therefore  as  important  to  note 
what  a  proper  budget  plan  should  not  include,  as  to  mark  its  chief 
essentials. 

An  appropriating  law  which  specifies  in  great  detail  the  pur¬ 
poses  for  which  alloted  funds  may  be  used,  does  not,  by  virtue  of 
this  feature,  become  a  budget  system;  nor  does  the  incorporation 
into  the  appropriation  bill  of  restrictions  as  to  the  use  of  funds  make 
a  state  budget;  nor  the  inclusion  of  provisions  that  grants  are  to  be 
available  but  for  one  year  produce  this  magic  device  for  efficiency, 
though  many  administrations  have  boasted  the  installation  of  a 
modern  budget  system  because  of  the  inclusion  of  one  or  more  of 
these  most  undesirable  elements.  A  budget  is  an  orderly  arrange¬ 
ment  of  data  embodying  the  estimated  needs  of  governmental 
services  for  the  fiscal  period,  accompanied  by  a  request,  preferably 
in  the  form  of  a  bill,  for  authorization  to  spend  public  funds  in 
accordance  with  the  plan  set  forth.  A  proper  budget  contains  all  '7 
the  information  which  the  legislature  can  use  in  order  to  enable  it 
to  come  to  a  proper  understanding  of  the  government’s  needs.  The 
departmental  estimates  revised  by  the  submitting  authority  to  fit 
the  requirements  of  the  state-wide  plan,  records  of  previous  costs 
for  like  services  and  such  other  data  as  will  justify  the  requests  will 
all  be  contained  in  these  documents.  a^ropriation  law  is  not 

the  budget,  but  is  the  authorization  to  spend  granted  by  the  legis- 


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lative  authority  after  a  perusal  of  the  information  contained  in  the 
budget. 

A  common  difficulty  found  in  our  appropriating  systems  as 
they  are  operated  in  our  American  states  arises  from  the  fact  that 
too  many  things  are  expected  of  the  appropriation  law.  Not  only 
does  the  legislature  attempt  in  this  act  to  present  a  plan  of  work  for 
the  administrative  departments,  but  to  correct  payroll  abuses,  pre¬ 
vent  improper  purchases,  provide  a  reporting  system  and  what 
is  thought  to  be  a  more  efficient  organization  of  administrative 
departments.  All  this  is  attempted  by  conditioning  the  grants 
so  that  funds  are  available  but  for  certain  purposes  which  are  speci¬ 
fied  in  considerable  detail.  To  take  an  illustration  from  the  last 
general  appropriation  law  of  the  State  of  Ohio,  we  read: 

DEPARTMENT  OF  PUBLIC  INSTRUCTION 


Personal  Service: 

A  1.  Salaries — 

Superintendent .  $4,000 . 00 

Assistant  superintendent .  2,500.00 

2  high  school  inspectors .  4,000 .00 

6  high  school  inspectors  half  time .  6,000 . 00 

Chief  clerk .  1,750.00 

Examination  clerk .  1, 800 . 00 

2  stenographers .  1 , 440 . 00 

Filing  clerk .  900.00 

Statistician .  1 , 500 . 00 

Messenger  and  shipping  clerk .  840 . 00 

88  county  superintendents .  85, 000 . 00 

450  district  superintendents .  270,000 .00 

•  72  normal  school  supervisors .  72,000.00 


Total .  $451,730.00 

*106  Ohio  Laws  (1915),  699. 


Such  detail  can  contribute  nothing  but  confusion  when  in¬ 
serted  in  an  appropriation  law.  It  substitutes  for  expert  services 
comparative  ignorance  in  the  organization  of  departments.  The 
state’s  experts  in  their  respective  fields  are  the  heads  of  the  depart¬ 
ments.  They  are  the  ones  best  fitted  to  judge  of  the  machinery 
necessary  for  their  work.  Certainly  the  members  of  the  legislature 
who  sit  through  but  a  short  session,  and  are  comparatively  un¬ 
acquainted  with  the  duties  of  the  departments,  can  not  safely  be 


Function  of  State  Budget 


7 


trusted  to  provide  an  organization  for  accomplishing  the  needed 
work.  The  assembly  can  decide  what  funds  are  available  for  the 
department  or  service,  it  can  decide  what  functions  it  considers 
of  greatest  importance,  but  it  is  in  no  position  to  determine  whether 
fewer  inspectors  or  more  equipment  are  required.  This  is  an  ad¬ 
ministrative,  not  a  legislative,  question,  and  can  not  be  properly 
solved  by  a  legislative  body. 

The  itemizing  of  the  appropriation  law  is  productive  of  many 
difficulties:  (a)  It  divides  responsibility.  The  head  of  a  department 
should  alone  be  accountable  for  the  economical  and  efficient  conduct 
of  the  affairs  of  his  office.  Within  the  appropriation  allowed  him, 
he  should  perform  the  duties  required  by  law  to  the  best  of  his 
ability.  He  can  do  this  only  when  he  has  free  rein  in  the  organiza¬ 
tion  of  his  force  for  the  work  it  must  do;  (b)  It  does  not  properly 
care  for  emergencies.  Our  state  legislatures  do  not  follow  the 
practice  of  meeting  at  frequent  intervals.  The  appropriation  bills 
once  passed  must  stand  for  one  or  two  years  just  as  they  are  made. 
No  matter  how  skillfully  the  estimates  may  be  prepared,  unlooked 
for  developments  are  certain  to  make  some  adjustments  desirable^ 
But  a  detailed  appropriation  law  contemplates  no  such  contingency. 
When  difficulties  arise  funds  must  be  forthcoming  from  some  central 
contingent  account  or  the  state  service  must  suffer  because  an 
important  function  is  neglected.  In  Ohio,  the  detail  with  which 
appropriation  laws  have  been  made  has  required  a  frequent  resort 
to  the  contingent  fund.  Services  denied  adequate  support  by  the 
legislature  have  sometimes  been  given  grants  in  this  way;  (c)  It 
produces  extravagance.  When  a  saving  in  one  service  can  be  util¬ 
ized  for  another  purpose,  an  incentive  to  economy  is  provided. 
When  funds  must  be  expended  lest  balances  lapse,  there  is  little 
motive  for  economy.  But  the  greatest  danger  is  that  an  inadequate 
appropriation  will  force  a  department  to  discontinue  an  important 
service.  A  plan  which  allows  administrative  officers  to  use  the 
funds  allotted  them  with  but  slight  legislative  restraint  through 
the  appropriation  law,  but  which  requires  careful  planning  by  the 
department  and  a  compliance  with  that  plan,  is  in  the  long  run  the 
most  economical. 

A  reason  frequently  urged  for  the  insertion  of  detail  in  appro¬ 
priation  laws,  is  that  it  is  necessary  to  prevent  deception  on  the  part 
of  administrative  officers.  It  is  apprehended  that  funds  may  be 


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secured  from  the  legislature  by  urging  the  needs  for  one  service,  but 
that  the  grants  when  allowed  may  be  diverted  for  other  purposes. 
It  has  been  this  practice  which  has  done  more  than  any  other  to 
fasten  a  system  of  detailed  appropriations  in  our  fiscal  system. 

Were  it  necessary  to  rely  wholly  upon  the  appropriation  law 
to  control  administrative  officers,  the  argument  for  detail  in  appro¬ 
priation  might  rest  on  firmer  ground.  But  it  is  one  of  the  poorest 
methods  that  could  be  devised  for  this  purpose,  because  this  gives 
legislative  control  of  what  is  essentially  an  administrative  function. 
The  best  budgetary  plans  we  have  in  this  country  are  found  in 
connection  with  private  businesses,  but  who  knows  of  a  successful 
corporation  which  employs  expert  administrators  and  so  hedges 
about  their  movements  that  their  skill  can  not  be  used  to  advantage? 
Our  cities  furnish  our  most  perfect  examples  of  public  budget  sys¬ 
tems,  yet  the^  best  models  of  appropriation  ordinances,  as  found  in 
such  cities  as  New  York,  Philadelphia,  Cincinnati  and  Dayton, 
contain  no  such  detail.  Reliance  is  placed  rather  upon  other  agen¬ 
cies  designed  through  administrative  guidance  to  effect  these  econo¬ 
mies.  The  question  of  the  best  organization  of  departments  can 
better  be  settled  through  an  efficiency  bureau  cooperating  with  a 
civil  service  commission.  A  properly  conducted  purchasing  depart¬ 
ment  will  check  abuses  in  the  purchase  of  supplies  and  utensils; 
and  the  budget  itself  rather  than  the  appropriation  law  is  the  proper 
place  to  exhibit  the  government’s  plan. 

When  the  legislature  has  determined  what  the  state  can  afford 
to  expend  for  a  given  service,  the  question  of  planning  the  most 
economical  use  of  these  funds  to  accomplish  the  work  which  the  legis¬ 
lature  wishes  performed,  can  best  be  done  by  administrative  officers. 
Administrative  officers  should  be  required  to  submit  a  working 
program  showing  with  considerable  detail  how  they  propose  to 
employ  appropriations  granted,  nor  should  expenditures  be  ap¬ 
proved  for  purposes  not  on  this  sanctioned  program.  In  case  of 
emergency,  it  should  be  possible  for  the  administrative  officers  to 
amend  their  program,  if  they  can  show  that  the  funds  at  their 
disposal  can  under  new  circumstances  which  have  arisen  be  used 
to  greater  advantage  in  a  different  way.  Administrative  safe¬ 
guards  should,  however,  be  thrown  about  such  changes  to  insure 
the  continued  use  of  these  grants  within  the  general  purpose  of 
their  allotment.  Such  a  plan  will  encourage  rather  than  prevent 


Function  of  State  Budget 


9 


the  use  of  expert  planning  for  the  most  judicial  expenditure  of 
public  funds  and  locate  responsibility  upon  administrative  officers 
for  the  wise  use  of  appropriations. 

Such  a  budget  system  will  provide  in  the  first  place  for  proper 
planning;  a  planning  which  for  each  department  will  provide  a 
program  and,  when  departmental  estimates  are  assembled,  will  pre¬ 
sent  for  the  state  as  a  whole  a  comprehensive  outline  for  the  year’s 
work.  It  will  show  a  correlation  between  revenue  and  expenditure 
and  the  amount  it  is  proposed  to  use  for  one  service  in  comparison 
with  the  sums  available  for  other  purposes.  It  will  be  a  plan  made 
out  and  approved  by  the  state’s  experts,  those  who  have  had  ex¬ 
perience  in  the  actual  administration  of  the  state’s  affairs  and  are 
most  familiar  with  the  public  needs.  Secondly,  such  a  budget 
system  will  give  the  legislature  and  the  general  public  full  informa¬ 
tion  as  to  the  fiscal  affairs  of  the  state  and  will  be  a  means  whereby 
the  administrative  officers  may  be  called  upon  to  justify  their  ad¬ 
ministrative  acts  and  give  an  account  of  their  stewardship.  Plans 
for  the  coming  year  must  be  presented  and  approved  and  submitted 
to  the  closest  public  scrutiny. 

It  centers  responsibility  because  the  administrative  officials  who 
must  carry  out  the  plan  are  charged  with  its  preparation.  The 
working  plan  is  one  prepared  by  the  responsible  administrative 
official,  not  by  a  legislative  committee  which  has  nothing  to  do 
with  carrying  out  the  functions  for  which  funds  are  provided  and 
may  be  in  ignorance  of  the  machinery  most  needed  for  this  work. 
It  provides  for  emergencies.  A  detailed  appropriation  law  restricts 
closely  the  use  of  funds  for  a  period,  sometimes  thirty  months  after 
the  law  is  passed.  It  is  difficult  for  even  the  most  skilled  adminis¬ 
trative  officers  to  plan  with  such  accuracy  for  so  long  a  period. 
With  new  state  services,  certain  planning  is  impossible.  A  proper 
budget  system  allows  a  change  in  the  detailed  use  of  funds  to  meet 
emergencies  as  they  arise  without  changing  the  purpose  for  which 
the  legislature  has  allowed  the  grant.  Such  a  budget  system  does 
not~inTo\vH^  to  do  administrative  work,  such  as 

providing  for  the  organization  of  departments,  the  amount  of  sup¬ 
plies  or  material,  or  specifying  kinds  to  be  utilized.  It  establishes 
the  legislature  as  a  body  of  approval,  rather  than  of  initiation,  which 
determines  governmental  policies,  rather  than  engages  in  the  work 
of  carrying  them  out. 


10 


The  Annals  of  the  American  Academy 


The  proper  budget  plan  should  provide  for  the  established 
services  of  the  state.  The  appropriation  law  should  not  be  utilized 
for  reorganization  purposes.  When  the  legislature  has  established 
a  service  or  organized  a  department  by  the  passage  of  a  law  through 
the  action  of  both  houses  of  the  legislature  and  the  approval  of  the 
executive,  such  a  service  should  be  maintained  as  long  as  it  is  the 
law.  It  should  not  be  competent  for  the  executive  or  one  branch 
of  the  legislature  to  destroy  the  service  by  failure  to  provide  for  its 
proper  maintenance.  But  an  appropriation  system  which  requires 
the  concerted  action  of  the  Governor  and  each  house  of  the  legisla¬ 
ture  at  each  session  to  maintain  state  services  is  faulty,  in  that  it 
places  the  most  important  legislative  functions  under  the  control 
of  any  group  which  can  influence  the  Governor  or  can  control  a 
majority  in  either  house,  or  in  states  which  require  a  two-thirds 
vote  on  appropriation  laws,  more  than  one-third  of  the  membership 
of  either  house.  Under  such  a  system,  the  Governor  of  Wisconsin 
could  have  re-organized  the  state  services  by  the  abolishment  of  the 
Legislative  Reference  Bureau,  which  has  done  such  valuable  work 
in  that  state.  But  that  this  was  not  the  will  of  the  people  of  the 
state  or  their  representatives  is  indicated  by  the  fact  that  this  pro¬ 
posal  received  the  support  of  but  eight  of  the  one  hundred  and  thirty- 
three  members  of  the  two  houses.  Yet  under  the  system  of  annual 
appropriations,  where  the  Governor  proposes  the  budget  and  the 
legislature  may  not  provide  for  services  he  neglects,  or  under  the 
plan  in  vogue  in  many  states  with  annual  appropriations  where  the 
Governor  may  veto  items,  this  department  would  have  been  entirely 
abolished.  The  plan  of  annual  appropriations  places  the  presump¬ 
tion  upon  the  discontinuance  of  services,  rather  than  upon  their 
maintenance,  but  when  the  regularly  constituted  law-making  author¬ 
ities  create  departments,  or  allot  functions,  it  is  reasonable  to  sup¬ 
pose  that  it  is  the  popular  will  that  these  services  be  adequately 
cared  for  until  the  law  is  changed.  To  carry  out  such  a  plan, 
however,  a  system  permitting  continuing  appropriations  is  essential. 

Probably  the  greatest  evil  resulting  from  the  periodical  appro¬ 
priation  plan  has  not  been  the  abolishing  of  state  departments  or 
services,  but  the  political  control  which  is  exercised  over  them  by 
the  threat  of  such  action.  There  are  in  our  state  services  many 
departments  designed  to  be  independent  of  the  legislature  or  the 
chief  executive.  The  judiciary  is  supposed  to  be  such  an  indepen d- 


Function  of  State  Budget 


11 


ent  branch.  Frequently  the  controller  is  chosen  by  election  in 
order  that  his  actions  may  be  free  from  executive  restraint.  Other 
devices  are  installed  to  free  semi-judicial  and  administrative  depart¬ 
ments  from  executive  dominance.  We  create  bi-partisan  or  non¬ 
partisan  boards,  provide  that  the  terms  of  their  members  shall 
expire  at  different  times,  in  order  that  no  administrative  officer  shall 
control  these  departments  by  virtue  of  his  appointments.  It  is 
customary  to  organize  civil  service  commissions,  public  utility 
commissions,  public  health  boards  and  boards  for  the  control  of 
the  state  institutions  in  this  way.  However,  the  independence 
which  we  wish  these  departments  to  exercise  is  lost  in  a  system 
where  the  favor  of  the  chief  executive  or  of  a  faction  strong  enough 
to  control  one  legislative  branch  must  be  cultivated.  In  fact  the 
most  insidious  form  of  corruption  is  found  under  such  a  system, 
because  it  is  so  little  understood,  and  influence  can  be  exerted  of 
which  the  public  is  ignorant.  The  virility  of  the  departments  given 
police  functions  is  taken  away,  because  these  agencies  are  afraid 
to  make  enemies  lest  the  limited  funds  placed  at  their  disposal 
weaken  them  to  such  an  extent  that  their  usefulness  will  pass  and 
the  justification  for  their  continuance  be  lost.  A  public  service 
commission  fears  to  incur  the  enmity  of  the  railroads  or  public 
utility  corporations  which  usually  maintain  lobbies  in  our  legislative 
halls  strong  enough  to  jeopardize  the  appropriation  upon  which  the 
commission  is  dependent.  In  a  similar  way,  the  activities  of  agri¬ 
cultural  commissions  or  organizations  charged  with  the  enforcement 
of  pure  food  laws,  or  departments  having  other  phases  of  public 
health  work  to  do,  must  be  shaped  so  as  not  to  incur  the  ill-will 
of  those  who  may  be  in  a  position  to  retaliate  through  the  use  of 
their  influence  with  the  executive  or  the  legislature.  We  have 
constantly  endeavored  to  keep  our  universities  and  larger  public 
institutions  of  the  state  “out  of  politics,”  but  when  these  institutions 
must  fight  for  their  lives  at  every  session,  they  are  forced  into 
politics  in  order  to  maintain  themselves.  Yet  the  appropriation 
systems  of  many  of  our  states  require  annual  or  biennial  grants 
and  two-thirds  of  them  attach  to  this  plan  the  power  of  the  Gov¬ 
ernor  to  veto  items  in  appropriation  bills,  which  power  ex-Presi- 
dent  Taft,  with  his  general  knowledge  of  political  agencies,  thinks 
“might  be  made  an  instrument  of  very  considerable  influence.” 

A  system  of  annual  appropriations  is  faulty  again,  in  that  it 


12 


The  Annals  of  the  American  Academy 


does  not  permit  planning  over  a  period  of  years.  The  ordinary 
budget  calls  for  a  plan  for  one  or  two  years.  We  are  learning  slowly 
in  this  country  that  great  political  organizations  require,  as  do  great 
industrial  organizations,  careful  planning  over  a  long  period  of 
years.  We  are  awakening  to  this  fact  in  our  cities  and  are  providing 
for  city  planning  commissions.  Every  one  familiar  with  the  prac¬ 
tices  of  industrial  corporations  knows  that  improvements  are  con¬ 
sidered  and  held  in  mind  forming  a  program  covering  a  num¬ 
ber  of  years.  The  expense  of  administering  our  large  public  in¬ 
stitutions  and  the  wastefulness  due  to  what  appears  to  be  short¬ 
sighted  policies  can  be  largely  attributed  to  this  lack  of  planning. 
Consequently  an  adequate  appropriation  system  must  allow  those 
in  charge  of  these  institutions  to  know  with  some  certainty  what 
funds  will  be  available  in  the  near  future  for  the  development  of  con¬ 
templated  projects. 

The  objections  which  are  most  frequently  raised  to  a  system  of 
permanent  appropriations  are  that  the  permanent  appropriations 
are  not  taken  into  consideration  when  the  legislature  considers  the 
immediate  appropriations  of  the  state,  and  that  appropriations 
established  by  permanent  laws  are  too  difficult  to  change.  The 
first  objection  arises  because  of  the  popular  error  of  confusing  the 
appropriation  law  with  the  budget,  and  trying  to  use  this  statute  as 
a  fiscal  plan.  The  error  of  such  a  method  has  already  been  pointed 
out.  When  the  fiscal  plan  is  presented  as  it  should  be  through  the 
budget  documents,  no  difficulty  can  be  found  in  noting  in  this  plan 
what  appropriations  are  already  provided  for  and  what  still  require 
legislative  sanction  in  order  to  put  the  program  of  expenditures  into 
effect,  or  where  amendments  to  the  permanent  appropriation  statutes 
are  required.  The  difficulty  of  change  is  more  a  virtue  than  a 
fault,  and  it  is  not  unreasonable  to  assume  that  when  the  legislature 
and  executive  have  been  convinced  of  the  uselessness  of  further 
appropriations,  the  law  authorizing  the  grant  may  be  amended  or 
repealed  as  easily  as  it  was  enacted  in  the  first  instance.  Certainly 
the  presumption  should  be  that  a  state  service  created  by  law  should 
be  maintained  until  the  law  is  changed.  It  should  not  be  competent 
for  any  body  with  less  authority  than  the  legislature  to  nullify  the 
law  by  refusing  appropriations. 

This  is  not  a  unique  or  untried  plan  which  is  advocated.  It 
obtains  in  many  of  our  states,  it  is  followed  for  some  appropriations 


Function  of  State  Budget 


13 


of  the  federal  government  and  is  to  be  found  in  certain  services 
provided  for  by  that  model  of  modern  budgetary  systems,  the  British 
budget.  The  British  budget  has  a  number  of  items,  which  are 
permanent  charges  upon  the  consolidated  fund,  and  annual  grants 
by  parliament  are  not  required.  Among  such  services,  we  find  the 
interest  and  sinking  fund  of  the  national  debt,  and  salaries  and  pen¬ 
sions  of  judges.  The  existence  of  such  a  system  in  Wisconsin  has 
contributed  as  largely  as  any  factor  in  making  that  state  a  model  of 
administrative  government.  The  Wisconsin  Railway  Commission 
could  not  have  done  its  effective  work  had  it  been  subject  at  each 
session  to  the  control  of  those  who  constitute  a  minority  among  the 
people  in  the  state,  but  who  were  frequently  powerful  enough  to 
control  one  house  of  the  legislature,  or  who  have  been  supported  by 
the  Governor.  Except  for  the  system  of  permanent  appropriations 
this  Commission  would  many  times  during  the  comparatively  few 
years  since  its  creation  have  been  abolished  or  rendered  powerless  to 
perform  its  functions.  The  University  of  Wisconsin  could  not  have 
maintained  its  enviable  position  were  it  dependent  upon  annual 
grants;  and  the  service,  which  it  has  so  admirably  rendered  to  that 
state,  as  well  as  to  the  entire  country,  would  have  been  greatly 
curtailed.  Examples  of  the  evils  of  the  annual  appropriation 
system  occur  to  every  one  who  has  been  at  all  familiar  with  legis¬ 
lative  practices  in  states  following  this  method.  We  can  scarcely 
expect  strong  and  independent  administrative  organizations  until 
we  can  provide  some  method  for  supporting  them,  which  will 
guarantee  their  maintenance  as  long  as  the  people  of  the  state  are  in 
sympathy  with  their  work. 

It  is  unfortunate  that  the  new  constitution  of  the  state  of 
New  York,  while  providing  so  acceptably  for  the  submission  of  an 
executive  budget,  denies  the  legislature  the  right  to  appropriate 
funds  for  a  period  longer  than  fifteen  months,  and  gives  the  Gov¬ 
ernor  so  complete  control  over  the  actual  shaping  of  the  appro¬ 
priation  measure.  When  such  power  is  centered  in  one  official,  a 
system  of  permanent  appropriations  for  established  services  is  even 
more  essential  to  prevent  the  chief  executive  from  assuming  legis¬ 
lative  prerogatives  through  his  control  over  public  grants. 

In  our  attempts  to  better  our  state  government,  we  have  been 
prone  to  apply  the  lessons  we  have  learned  in  the  government  of 
cities.  This  is  a  very  natural  and  in  many  respects  a  commendable 


14 


The  Annals  of  the  American  Academy 


practice,  because  the  municipalities  of  this  country  are  far  in  the  van 
in  the  crusade  for  efficient  government.  They  are  almost  alone 
among  our  public  bodies  in  being  provided  with  budget  systems, 
central  purchasing  agencies,  standardizing  bureaus  and  similar 
devices  designed  to  secure  a  better  government  at  less  cost.  But 
when  institutions  which  have  proved  effective  in  cities  are  imitated 
in  the  state,  it  is  important  that  differences  between  city  and  state 
governments  be  noted.  The  constituency  of  the  city  administra¬ 
tion  being  much  more  contiguous  than  that  of  the  state,  can  more 
easily  inform  itself  of  the  actions  of  the  executive  and  legislative 
officials  and  pass  an  intelligent  judgment  upon  them.  These  public 
servants  become  more  responsive  to  public  opinion  because  public 
opinion  is  more  definite  and  ascertainable.  Opportunity  for  con¬ 
ferences  between  citizens  and  officers  is  greater  and  adjustments 
more  easily  made.  The  city  council  meets  frequently,  usually 
weekly  and  can  be  summoned  for  extra  sessions  within  forty-eight 
hours  with  little  additional  expense.  In  most  of  our  states  the 
state  legislature  meets  but  once  in  two  years  and  adjournment  is 
usually  taken  after  a  short  session  for  a  two  month  period.  Special 
sessions  are  inconvenient  and  expensive.  The  legislative  body  of  an 
American  city  is  with  few  exceptions  unicameral  and  though  this 
form  has  been  considered  for  our  state  governments,  it  has  as  yet 
been  nowhere  adopted. 

But  what  is  possibly  a  more  important  distinction  between  state 
and  municipal  government  lies  in  the  widely  different  powers  which 
the  legislative  departments  of  these  governmental  units  possess. 
The  legislature  of  a  state  is  concerned,  perhaps  chiefly,  with  the 
enactment  of  laws  affecting  the  rights  of  individuals  in  their  rela¬ 
tions  with  each  other,  or  with  the  state.  Secondly,  it  possesses  the 
power,  within  the  restrictions  of  the  constitution,  of  organizing  the 
administrative  departments  of  the  state  and  establishing  machinery 
for  the  performance  of  governmental  functions  and  determining 
what  program  of  activity  shall  be  followed.  Thirdly,  it  provides 
for  financing  state  services,  decides  by  what  method  public  funds 
shall  be  raised,  how  much  is  needed  and  the  purposes  for  which  the 
public  money  shall  be  used.  The  authority  granted  a  city  council, 
or  othet’  legislative  organ  of  a  municipality,  is  much  more  restricted. 
Its  power  to  pass  ordinances  affecting  personal  rights  is  of  too  re¬ 
stricted  a  character  to  be  comparable  with  the  power  lodged  with  a 


Function  of  State  Budget 


15 


state  legislature  and  is  chiefly  administrative  in  character.  The 
city  council  usually  has  relatively  little  to  do  with  the  administra¬ 
tive  organization  of  the  municipality.  The  only  limitations  on  the 
state  legislature  are  those  found  in  the  constitution;  the  city  council 
is  restricted. by  the  city  charter  and  by  state  laws.  These  latter 
with  considerable  more  minuteness  provide  for  the  administrative 
organization  of  the  city  and  confer  powers  and  duties  on  these 
departments  for  which  no  action  by  the  legislative  authority  of  the 
municipality  is  required.  Only  state  law,  or,  in  most  cases  with 
home-rule  charters,  action  by  the  people,  can  effect  a  change. 
When,  therefore,  an  executive  officer  presents  to  the  state  legislature 
a  budget,  the  body  from  which  appropriations  are  asked  is  the  one 
which  can  adopt  policies  changing  completely  the  form  of  adminis¬ 
trative  organization  or  the  functions  of  the  departments,  it  can  take 
away  or  add  to  their  powers  and  duties.  Until  the  extent  of  the 
change  in  administrative  organization  and  functions  is  determined, 
accurate  budget  planning  must  wait.  But  with  the  preparation  of 
the  city’s  fiscal  program  such  a  difficulty  is  seldom  confronted  and 
budgetary  procedure  becomes  far  less  complicated.  Consequently, 
in  endeavoring  to  shape  systems  of  state  organization  from  our 
municipal  experience  care  must  be  taken  that  institutions  be  prop¬ 
erly  adapted. 

The  last  administration  in  the  state  of  Ohio  came  into  power 
with  an  extensive  program  for  legislation  calling  for  adminis¬ 
trative  re-organization.  The  functions  of  many  isolated  depart¬ 
ments  dealing  with  agriculture  were  focused  in  a  newly  created 
agricultural  commission.  An  industrial  commission  was  organized 
to  deal  with  affairs  affecting  primarily  industrial  relations.  The 
Public  Utility  Commission  was  re-organized  and  given  greater 
powers,  and  the  Civil  Service  Commission  was  created  pursuant  to 
constitutional  amendment.  Even,  though  his  influence  over  the 
legislature  was  very  great,  the  Governor  was  not  entirely  successful 
in  prosecuting  some  of  his  original  re-organization  plans,  and  it  was 
uncertain  until  the  legislative  days  drew  to  a  close  just  what  form 
some  of  the  administrative  re-organization  laws  would  take. 

The  present  administration  had  an  extensive  program  for  re¬ 
organization.  It  wished  to  change  the  form  of  the  Civil  Service 
Commission,  the  Agricultural  Commission  and  the  Liquor  License 
Commission.  Yet  the  fate  of  the  measure  organizing  this  last  Com- 


16 


The  Annals  of  the  American  Academy 


mission  was  determined  the  last  day  of  the  session,  and  the  re¬ 
organization  plans  for  the  other  departments  were  pending  until 
late.  In  Wisconsin,  the  Governor  had  plans  for  combining  all 
educational  institutions  under  a  single  board  of  education,  and 
of  radically  changing  the  Tax  Commission,  yet  he  was  unable  to 
secure  legislative  approval  of  this  program.  It  should  not  be 
competent  for  the  Governor  to  force  such  a  re-organization  by  his 
method  of  compiling  the  budget,  nor  should  he  be  given  such  power 
over  legislation  as  this  control  over  appropriations  accords  him. 

We  have  justified  an  increase  in  executive  power,  because  we 
believe  that  in  this  way,  we  can  locate  responsibility,  and  that 
knowledge  of  this  fact  will  deter  officers  from  the  commission  of 
acts  which  will  not  meet  with  popular  approval.  We  have  admired 
the  parliamentary  system  of  government  because  it  is  “  responsible.” 
For  every  official  act,  censure  or  praise  may  be  definitely  located. 
But  the  responsibility  of  the  British  government  goes  farther  than 
this.  In  case  any  act  is  contemplated  by  the  British  government, 
which  it  is  thought  may  not  meet  with  popular  approval,  the 
question  is  determined  immediately  by  an  election.  Should  it 
eventuate  that  the  proposed  action  of  the  government  is  not 
supported  by  the  people,  this  fact  is  at  once  apparent  and  the  new 
government  which  results  will  shape  its  course  on  this  very 
question  in  conformity  with  the  popular  will.  The  people  are 
thus  provided  with  machinery  to  prevent  the  government’s  ac¬ 
tion  and  so  avoid  the  consequences  of  what  it  is  believed  will 
prove  an  unfortunate  policy. 

In  our  government,  however,  location  of  responsibility  means 
fixing  of  blame.  We  cannot  determine,  except  in  some  instances 
through  the  use  of  the  referendum,  what  will  be  the  popular  judg¬ 
ment  on  any  issue.  We  must  wait  until  a  periodic  election  presents 
opportunity  for  approval  or  censure  of  official  acts.  Then  the 
judgment  expressed  is  not  a  judgment  formed  upon  any  single  issue, 
but  an  estimate  of  the  actions  of  the  executive  of  which  we  ap¬ 
prove  and  of  those  which  we  censure.  We  form  our  judgment  by 
determining  the  relative  weight  of  these  issues.  Irreparable 
damage  may  have  been  done  before  the  person  “responsible”  may  be 
checked  and  the  accounting  to  which  he  is  subjected  is  usually 
limited  to  jeopardizing  the  chance  of  his  reelection  should  he  again 
stand  as  a  candidate  before  the  same  constitutency.  A  business, 
organization  could  not  operate  under  such  a  system.  While  it  holds 


Function  of  State  Budget 


17 


its  officers  responsible,  it  does  not  give  them  power  to  administer 
corporate  affairs  in  violation  of  the  desires  of  the  stockholders.  A 
control  is  exercised  in  time  to  prevent  abuses.  Dependence  is  not 
placed  on  possible  punishment  for  mistakes. 

The  development  of  most  of  our  political  institutions  has  come 
about  by  an  adaptation  of  governmental  devices  which  seem  to  ope¬ 
rate  elsewhere  in  an  acceptable  manner.  But  we  should  incorporate 
these  innovations  only  after  a  careful  study  convinces  us  of  their 
acceptability,  and  a  close  analysis  of  our  own  institutions  proves 
them  capable  of  being  patterned  after  the  model  we  admire.  We 
cannot  safely  rely  on  temporary  appropriations  in  this  country  even 
though  that  practice  may  be  followed  in  certain  countries  which 
have  responsible  ministries.  Nor  can  our  officials  be  made  respon¬ 
sible  in  that  same  sense  until  we  make  a  rather  complete  change  in 
our  plan  of  government.  But  it  is  possible  to  install  in  our  state 
and  federal  governments,  systems  which  will  perform  adequately 
the  proper  functions  of  a  modern  budget  without  subjecting  us  to 
the  dangers  of  such  ill-advised  reforms  as  have  been  noted. 

There  is  no  more  important  reform  than  the  installation  of  an 
adequate  budget  system  in  our  state  governments.  Only  in  this 
way  can  the  affairs  of  government  be  conducted  efficiently,  eco¬ 
nomically  and  in  a  way  to  permit  of  an  orderly  development.  That 
a  budget  system  will  prevent  the  constant  increase  in  the  cost  of 
government,  in  accordance  with  a  belief  frequently  expressed,  few 
who  observe  the  constantly  expanding  functions  of  government 
dare  hope.  It  will,  however,  require  that  these  developments  be 
made  in  accordance  with  a  well  considered  plan;  a  plan  prepared 
by  those  most  familiar  with  the  government  service  and  approved 
by  the  representatives  of  the  people  acting  with  full  information 
and  with  the  entire  program  of  the  state’s  needs  in  view.  But 
these  advantages  will  be  secured  at  too  dear  a  price  if  we  confer 
initiative  powers  on  our  law-making  bodies,  or  fail  to  protect  the 
great  institutions  and  services  of  our  states  from  those  who,  repre¬ 
senting  a  minority  of  the  people,  would  seek  to  coerce  them  by  con¬ 
trolling  their  funds.  We  must  guard  against  these  dangers  while 
endeavoring  to  secure  the  advantages  which  may  accrue  through  a 
reform  in  our  fiscal  plan.  The  proper  function  of  the  budget  is  not 
the  reorganization  of  the  state  services,  but  the  presentation  and 
adoption  of  a  plan  in  fiscal  affairs  which  will  insure  the  most  judicial 
use  of  the  resources  of  the  state  for  the  purposes  most  desired  by  th^ 
citizens  of  the  state. 


